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Aug. 23 — Physicians have been receiving payments from drug and device manufacturers for years,
covering everything from meals to speaking fees to royalties, but with the advent
of the Open Payments program in 2014, the public gained a window into this multi-billion
dollar relationship.

With a few clicks on a website, patients can see exactly how much money their doctors
received from drug and device companies.

But, some say the publicly available data lack context that explain why companies
paid doctors sometimes large sums, making what could be legitimate payments seem questionable
and casting doubt on physician-industry collaborations.

The Open Payments program was created by the Affordable Care Act and requires manufacturers
of drugs, devices and other medical supplies and group purchasing organizations to
report certain payments to physicians and teaching hospitals. The results are published
on an HHS website available to the public at
https://openpaymentsdata.cms.gov/.

A Bloomberg BNA analysis of the most recent Open Payments data (for calendar year
2015) found that two medical specialities dominate the field when it comes to large
payments from drug and device companies.

Payments to internal medicine physicians totaled
$598 million, followed by payments to orthopedic surgeons at $409 million. Combined
payments to psychiatrists and neurologists were a distant third at $141 million.

Median total payments to orthopedic surgeons were the highest among all specialists
at $3,275, followed by payments to internal medicine physicians at $2,752. Payments
to general surgeons trailed in third at $961.

Orthopedic surgeons did especially well in terms of their overall payments, with one
physician receiving $38 million and another $19 million from device companies in 2015.

The two physicians, Roger Jackson, an orthopedic surgeon in Kansas City, and Stephen
Burkhart, an orthopedic surgeon in San Antonio, Texas, received $38 million and $19
million, respectively, in royalty and license payments.

Payments to orthopedic surgeons were driven by relationships with medical device manufacturers
involved with developing new products, resulting in royalty payments that far outpaced
other categories of device company payments to orthopedic surgeons. Manufacturers
paid $291 million in royalties to orthopedic surgeons in 2015, followed by $58.7 million
in consulting fees and
$16.6 million for lodging.

But while the Open Payments data show how much was paid to doctors and in, general
terms, why they received the payments, the data raise many questions. For example,
what was the nature of the consulting that physicians provided in return for the payments,
and why did companies pay physicians for lodging?

An initial data release in September 2014 covered the last five months of 2013 and
included 4.4 million payments to physicians and teaching hospitals totaling about
$3.5 billion (12 PLIR 1384, 10/3/14). The most recent data release was in June and included $6.49 billion in payments
for all of 2015, a drop from $7.49 billion in payments in 2014

The Centers for Medicare &
Medicaid Services didn't respond to a request for comment regarding the context of
Open Payments data.

Helpful to Patients?

The lack of data context extends to all physician categories, including internal medicine,
Elizabeth Carder-Thompson, an attorney at Reed Smith LLP in Washington, told Bloomberg
BNA. Better information about drug and device company payments to physicians would
go a long way to ensuring that the data can be helpful in patient decisions, she said.

“It also would help prevent consumers from forming mistaken impressions that all payments
to physicians are inherently suspect,” Carder-Thompson said.

Non-educational speaking fees accounted for $241.3 million of the overall $598 million
device and pharmaceutical manufacturers paid to internal medicine physicians in 2015,
and Carder-Thompson said the category is akin to a catch-all payment category.

“That may explain why it's the most popular, and the numbers appear high when viewing
the large internist group,” Carder-Thompson said.

The number of payment categories is limited, Carder-Thompson, and there's no “other
payment” category.

While the CMS suggests that companies should use the “gift” category to report general
payments that fit no specific categories, both the pharmaceutical and device industry
prohibit gifts to physicians, and “we've cautioned our clients about the poor optics
of using “gift”
for a nature of payment,” Carder-Thompson said.

Eric Fader, an attorney with Day Pitney LLP in New York, told Bloomberg BNA that internists
received the most device and pharma company payments primarily because there many
more physicians who are internists than there are in any particular specialty. Open
Payments data for 2015 covered 158,451 internists compared to 22,121 orthopedic surgeons,
for example.

Kirk Ogrosky, an attorney with Arnold & Porter LLP in Washington, told Bloomberg BNA
that without appropriate context, the public can't begin to understand the numbers
included in the Open Payments database.

“This current data release does not, nor has it ever, provided enough information
for the public to make intelligent judgments about physicians,”
Ogrosky said.

Ogrosky likened releasing Open Payments data with no context to viewing claims data
with no context.

“For example, a highly specialized cardiac surgeon in a densely populated area who
is known by other cardiologists to be the best at a certain procedure may look off
the charts until someone actually looks at the claims and her patient base,” Ogrosky
said. The cardiologists could be saving taxpayers millions of dollars, yet the public
would only know her as a high biller, he said.

Technical Field

Orthopedic surgery is one of the more technical medical specialties, and as such,
has a close relationship with medical device companies that supply everything from
hip replacements to spinal implants.

Alexe Page, an orthopedic surgeon in La Jolla, Calif., and chair of the American Academy
of Orthopaedic Surgeons' (AAOS) health care systems committee, told Bloomberg BNA
that while the payments can be large, they cover a very technical field in which not
every physician has the ability to operate. Surgeons with the expertise to operate
on patients are more likely to collaborate with the device industry, Page said.

Page said context is needed to distinguish what the individual payments mean.

For example, a majority of the payments to orthopedic surgeons are royalties to physicians
who have a role in creating devices, and the CMS should present the Open Payments
data in a more meaningful way to highlight this fact, Page said.

“Some doctors are inventors, and they end up monetizing their inventions,” Page said.

Page said relationships between industry and physicians were important for learning
about new techniques and treatments, and keeping those relationships going requires
money.

Orthopedic spinal surgeons had the highest average total payment per physician ($56,000)
in the 2015 Open Payment data, and Page said that was due to the unique nature of
the sub-specialty.

Out of the $409 million in payments orthopedists received in 2015, $290.9 million
were royalties or licensing fees.

“It's a tough area to treat, and it's heavily driven by implants,” Page said.

Chronic back pain is a fairly common condition, Page said, which drives demand for
the surgeries. As a result, physicians who helped invent or develop back-related medical
devices have seen larger payments from manufacturers in the form of royalties and
licensing fees.

A spokesperson from Stryker Corp., a device manufacturer in Kalamazoo, Mich., told
Bloomberg BNA the goals of the Sunshine Act (Section 6002 of the ACA) which created the Open Payments program)
are in line with Stryker's “commitment to providing quality products and services
to supporting the health and well-being of patients.”

Orthopedic products make up 43 percent of Stryker's total sales, including replacements
for hips, knees, feet and ankles.

“By collaborating with physicians, Stryker is able to make health-care better through
developing innovative products and technologies and by training and educating health-care
professionals on the safe and effective use of our products,” the spokesperson said.

Hands-On Interactions

As device manufacturers work on new procedures and services, collaboration with physicians
is critical.

Carder-Thompson said the medical device space is very different from the pharmaceutical
arena in terms of level of hands-on physician-industry interaction, especially in
regard to orthopedists.

“Patients are the beneficiaries of these high-level professional interactions, but
I'm concerned there isn't enough context provided in the Open Payments data to enable
a full understanding what's behind the numbers,”
Carder-Thompson said.

While the aggregate dollar value of payments may appear significant when viewed in
isolation, the individual interactions between physicians and manufacturers are critical
to advancing innovations within the orthopedic surgical space, she said.

New Products and Procedures

Carder-Thompson said as new procedures and devices have emerged, many surgeons have
contributed significant intellectual property to product development, based on their
hands-on surgical experience.

“Compensation for their contributions may involve the payment of a royalty for the
creation of a new product, and royalties are generally based on product sales for
a pre-determined period of time,” Carder-Thompson said.

For example, royalty payments may have been negotiated years ago and may continue
for another 10 years.

In fact, when it comes to royalty payments, manufacturers may have no current interactions
with the orthopedic surgeon beyond sending a modest royalty payment and reporting
to the Open Payments database, Carder-Thompson said.

Some of the payments to orthopedic surgeons are also attributable to clinical research
for which the surgeons serve as principal investigators, while others reflect payments
to physicians who launched start-up companies that are later acquired by larger companies,
she said.

Additionally, Carder-Thompson said quite a few orthopedic surgeons have direct consulting
relationships with device industry, helping to develop product enhancement, formulate
surgical protocols and train new surgeons on emerging techniques.

“So there are many different types of interactions with the industry, all geared toward
improving products and techniques and enhancing patient care,”
Carder-Thompson said.

Context Challenges

Matt Wetzel, vice president and assistant general counsel at the Advanced Medical
Technology Association
(AdvaMed), likewise told Bloomberg BNA that greater context is an absolute necessity.

While AdvaMed hasn't seen evidence that physicians are pulling back from relationships
with manufacturers, some physicians have been wary of having their names listed in
the Open Payments database, Wetzel said.

One problem with the Open Payments program is the small number of categories in which
a manufacturer can report a payment, Wetzel said. Manufacturers have a set number
of categories to fit payments into, covering:

consulting fees;

compensation for services other than consulting, including serving as faculty or
as a speaker at an event other than a continuing education program;

honoraria;

gifts;

entertainment;

food and beverage;

travel and lodging;

education;

research;

charitable contributions;

royalties or licenses;

current or prospective ownership or investment interest;

compensation for serving as faculty or as a speaker for an unaccredited and non-certified
continuing education program;

compensation for serving as faculty or as a speaker for an accredited or certified
continuing education program;

grants;
and

space rental or facility fees.

The current set of categories doesn't cover all the types of payments manufacturers
make, Wetzel said, making it hard to provide any context around a payment.

For example, a standard industry practice is to loan equipment to physicians for up
to 90 days, but there's no category where such payments can be disclosed and made
sense of, Wetzel said, forcing those payments into an unrelated category.

While large payments can appear questionable and even inappropriate, Wetzel said the
AdvaMed code of ethic encourages companies to exclude from royalty payments any personal
use by a physician of a device for which they receive royalties.

Device manufacturers enter into individual royalties contracts with physicians during
which they can set the terms of the royalty payments, such as ensuring a physician
doesn't receive royalties for any products they use in their own practice. Excluding
a physician's use of a particular device from their royalty payments defuses any question
of overutilization, Wetzel said.

“Transparency's here to stay, so the more context, the better,” Wetzel said.

Administrative Burdens

Wetzel said the CMS also should fix some technical issues with the actual reporting
system, such as improving the inputting of data and speeding up the dispute resolution
process.

The dispute process allows physicians to view any data reported about them and file
a dispute if there's inaccurate information. Physicians who register with the Open
Payments program have 45 days to review and dispute data before the June publication
each year. Once the data are released, physicians can file a dispute through Dec.
31. The annual Open Payments data publication also includes updated data from previous
years.

The AAOS' Page also said the dispute process could be improved. The current process
can be frustrating and time consuming, she said, requiring physicians to go through
the data themselves.

Page also said Open Payments has had an ongoing problem verifying the accuracy of
reported payment data.

“The industry really has to keep good track of how the money's spent,” Page said.

Page said she was hopeful that future iterations of the Open Payments program would
fix some of the problems.

Moving forward, Wetzel encouraged stakeholders to take advantage of the CMS's request
for comments on improving the Open Payment system, which was contained in the proposed
2017 physician fee schedule. Comments are due Sept. 6.

To contact the reporters on this story: James Swann in Washington at
jswann1@bna.com; Madi Alexander in Washington at malexander@bna.com

To contact the editor responsible for this story: Kendra Casey Plank at
kcasey@bna.com

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